Kauffman Foundation Study Shows Consistent Entrepreneurial Entry and Increasing Foreign-Born Start Ups

Report Includes State-by-State Breakdown of Entrepreneurial Activity

While the rate of entrepreneurial activity has remained remarkably consistent over the past decade with nearly 465,000 people creating new businesses on average each month, subtle year-to-year shifts in the gender, demographic, geographic and ethnic make-up are changing the public face of the American entrepreneur. This is according to a national assessment of entrepreneurial activity by the Ewing Marion Kauffman Foundation.

According to the Kauffman Index of Entrepreneurial Activity, the only annual study to measure business start-up activity for the entire U.S. adult population at the individual owner level, Asians, Latinos and immigrants far outpaced native-born Americans in entrepreneurial activity last year while African Americans experienced a decline.

Entrepreneurial activity for men did not change between 2005-2006, ending a downward trend that began in 2003. And, the rate of entrepreneurial activity for women declined slightly.

Regionally, the rates of entrepreneurial activity declined in the Midwest. As a result, the Midwest had the lowest level of entrepreneurial activity of all regions for the first time in the past 11 years, replacing the Northeast, which historically had posted the lowest rates of entrepreneurial activity every year from 1996 to 2005.

The five states with the highest rates of entrepreneurial activity were Montana, Mississippi, Georgia, Oklahoma and Maine. The five states with the lowest rates of entrepreneurial activity were Michigan, Pennsylvania, South Carolina, Illinois and Delaware.

Data for the Kauffman Index of Entrepreneurial Activity are derived from the monthly Current Population Survey (CPS), a national population survey conducted by the U.S. Bureau of the Census and the Bureau of Labor Statistics. The detailed demographic information available allows researchers to estimate rates of entrepreneurial activity by race, education, region, age, and immigrant status. Unlike other studies that capture young businesses that are more than a year old, the Kauffman Index of Entrepreneurial Activity captures all adults 20-64 who initially start a business, including those who own incorporated or unincorporated businesses and those who are employers and non-employers. Capturing new business owners in their first month of significant business activity serves as a leading indicator of new business creation in the United States.

The Index is a key component and one of the 26 top indicators in the compilation of the Kauffman Foundation's highly recognized State New Economy Index. That report, released earlier this year, is a state-by-state analysis of how state economies are transforming from an old industrial economic model based on "smokestack chasing" to an increasingly global-, knowledge- and innovation-based New Economy.

"The United States continues to be a very entrepreneurial nation," said Carl Schramm, president and chief executive officer of the Ewing Marion Kauffman Foundation. "The large portion of entrepreneurial firms and the significant number of jobs created by smaller, newer and growing firms in America are a strong indication that the entrepreneurial sector, with its flexibility and capacity to adapt quickly, is poised to become an even more important factor in our nation's economic growth."

"Although research on entrepreneurship is growing rapidly, there are very few large national studies other than the Kauffman Index of Entrepreneurial Activity that provide information on recent trends in entrepreneurial business creation," said Robert W. Fairlie of the University of California, Santa Cruz, who developed the Kauffman Index.

Among the key findings in the Kauffman Index of Entrepreneurial Activity:

--  The immigrant rate of entrepreneurial activity increased from 0.35
    percent in 2005 to 0.37 percent in 2006. As in previous years, the rate of
    entrepreneurial activity for immigrants was substantially higher than the
    rate for the native-born population (0.27 percent).

--  The rate of entrepreneurial activity for Asians increased from 0.27
    percent in 2005 to 0.32 percent in 2006. The rate for non-Latino whites
    remained constant at 0.29 percent between 2005 and 2006. For African
    Americans, the rate of entrepreneurial activity decreased slightly from
    0.24 percent in 2005 to 0.22 percent in 2006. The Latino rate increased
    slightly from 0.32 percent to 0.33 percent during the same time period.

--  Among the fifteen largest metropolitan regions in the United States,
    the highest rates of entrepreneurial activity were in Miami (0.50 percent)
    and Atlanta (0.49 percent). The large metropolitan regions with the lowest
    rates of entrepreneurial activity were Detroit (0.13 percent) and Chicago
    (0.18 percent).

--  In 2006, an average of 0.29 percent of the adult population (or 290
    out of 100,000 adults) created a new business each month, representing
    approximately 465,000 new businesses per month. The rate of entrepreneurial
    activity for the adult population overall also was 0.29 in 2005.

--  The rate of entrepreneurial activity for men (0.35 percent) did not
    change between 2005 and 2006, ending the downward trend that began in 2003.
    The rate for women declined slightly from 0.24 percent in 2005 to 0.23
    percent in 2006.
    

Further information about the Index report can be downloaded at www.kauffman.org.

About the Kauffman Foundation

The Ewing Marion Kauffman Foundation of Kansas City is a private, nonpartisan foundation that works with partners to advance entrepreneurship in America and improve the education of children and youth. The Kauffman Foundation was established in the mid-1960s by the late entrepreneur and philanthropist Ewing Marion Kauffman. Information about the Kauffman Foundation is available at www.kauffman.org.

Go to http://www.kauffman.org/kauffmanindex/ to download graphic files from the Index.